Gov’t says banking sector stable despite banks undergoing receivership

President Uhuru Kenyatta has thrown his weight behind the move by Central Bank Governor Dr. Patrick Njoroge Ngugi to clean up the banking sector.

Kenyatta, who was speaking during his departure for Kenya from Germany, said that the placing of Imperial Bank, Dubai bank and Chase bank under receivership by the Central Bank of Kenya is a sign of strengthening banking systems..

The Head of State, however, moved to assure Kenyans saying that there is no reason for worry over the banking sector further calling for the protection of depositors funds.

Speaking at the same time, National Treasury Cabinet Secretary Henry Rotich moved to assure Kenyans that all is well in the banking sector.

According to Rotich, Central Bank is on the right track towards protecting the financial system adding that Treasury is working closely with the Central Bank to isolate and contain the impact of banks being placed under receivership.

Kenyatta’s remarks come just a day after mid-tier lender Chase Bank was placed under receivership by the Central Bank following a spate of panic withdrawals.

In a statement, the banking regulator says the bank would be under receivership for 12 months following what the CBK considered to be unsafe financial conditions.

“Chase Bank Limited experienced liquidity difficulties, following inaccurate social media reports and the stepping aside of two of its directors. Consequently, it was not able to meet its financial obligations on April 6, 2016,” CBK said in a statement.

The restated financials showed that the bank had understated its conditional liabilities which stood at Ksh 26.6 billion as opposed to Ksh 13.2 billion it had earlier published.

The bank had also understated its loans to employees and directors which amounted to Ksh 13.6 billion against the Ksh 3.24 billion shillings reported earlier.

The bank’s non-performing loan portfolio also shot up to Ksh 11 billion in 2015.

Chase Bank becomes the third bank to be placed under receivership under the reign of Dr. Njoroge. In 2015, the regulator placed Dubai Bank and Imperial Bank under receivership in the space of two months citing unsafe banking conditions.